presented by steve mccarty, csp risk control specialist pma companies understanding the experience...
TRANSCRIPT
Presented by Steve McCarty, CSP
Risk Control Specialist
PMA Companies
Understanding the Experience Modification Factor
Today’s Objectives:
• Establish common, practical knowledge about Experience Modification Factors.
• Identify ways one can have an impact on the Experience Modification Rate and save your company money.
Questions to ask Yourself:1. What is your current mod and your three year
mod trend?
2. What will the impact be of the next year to “roll off” the calculation? (+ / - )
3. What will the impact be of the next year to come into the calculation? (+ / - )
4. *What can we do to impact the mod?
Experience Modification – The Basics
07 08 09 10 11 12
• Also known as EMF, X-Mod or Mod• Based on 3 Year Loss History*
Where Do Exp Mods Come From?
Rating Bureaus1. NCCI
2. Certain State Rating Bureaus1. Pennsylvania
2. Delaware
3. New Jersey
4. + more
NCCI State Map
Why Are Exp Mods Important?
• Ability to Obtain work
• Premium Calculator (Manual rates are multiplied by the Mod)
The Rating Process: 1-2-3…41. An actuarial based method
2. Codes exist for all ‘professions’
3. Bureau sets rates ($) for each code based on claims experience in the class
4. Rates are used by insurance companies for premium basis
Manual Premium• Class Code Rate
– Class code based upon nature (risk) of work– Cost per $100 of payroll– Examples:
• Code 7373 – School Bus Contractor: $4.94 per $100 of payroll• Code 8385 – Bus Company Garage Employees: $3.97 per $100
of payroll• Code 7382 – Bus Co All Other Employees: $8.25 per $100 of
payroll• Code 8810 - Clerical is $0.25 per $100 of payroll
• Class Rate X Class Payroll/$100 = ‘Manual Premium’• Everyone with same class codes in the same state starts
with same manual premium.
Developing Your Mod
NCCI compares:
your actual losses (3 yrs)
to
the expected losses in the class over a three year period
= Your Exp Mod
Example: $100,000 annual manual premium
DEBIT (1.5 = $150,000)
Base (1.00 = $100,000)
CREDIT (0.50 = $50,000)
Sales Required to Pay for a Debit Mod
Additional Costs
1% 2% 3% 4% 5%
$1,000 $100,000 $50,000 $33,000 $25,000 $20,000
$5,000 $500,000 $250,000 $167,000 $125,000 $100,000
$10,000 $1,000,000 $500,000 $333,000 $250,000 $200,000
$25,000 $2,500,000 $1,250,000 $833,000 $625,000 $500,000
$100,000 $10,000,000 $5,000,000 $3,333,000 $2,500,000 $2,000,000
If your company profit margin is:
Common Misconceptions
– Zero dollar incidents impact calculation
– Insurance companies calculate and set rates
– ExMods can never be ( < ) .75 & ( > ) than 1.5
– A company can not have a ( + ) impact on their ExMod
Exp Mods: Incentives for Both Parties
• Motivate business to perform well
• Motivate carriers to write less than average business
• A very practical, numbers driven system
Some Tough President Questions1. We had a major increase in our
WC premium, did you know this was coming?
2. We couldn’t bid on a project due to our X-mod. Why?
3. If we have a good year this year, will it go back down?
4. Are we having a good year?
5. Our experience mod is 1.54. Is that good?
6. What direction is it heading?
7. What can we do to make it go down?
Driving the Mod Down
• A combination of:– Safety management– Claims management
• Long term risk management mindset
Controllable Factor?
• What is controllable?
Your losses!
Your claims dollars help determine your workers’ compensation premium in future years
Driving the Mod Down
• Good job candidate screening• MVR review & stringent
review criteria• Drug testing• Require new DOT
physical• Consider use of
functional capacity evaluations
Driving the Mod Down
• Effective employee monitoring• At least annual MVR
review• Post accident, random
and for cause drug testing
• Active driver monitoring & enforcement (e.g.,DriveCam, SmartDrive and “1-800 How’s My Driving” programs, at least annual driver shadowing etc.)
Driving the Mod Down• Other Workplace Controls
• Conduct regular safety training for all existing employees in driving safety; slip, trip & fall prevention and safe lifting
• Establish 1-person lifting limits (<75 pounds)• Establish footwear policies (rubber sole with good
tread) and consider the required use of rated slip-resistant footwear.
• Conduct regular hazard surveys for unsafe conditions and unsafe acts in shop/yard areas.
• Thoroughly investigate all work-related accidents to identify root cause and actions to prevent recurrence.
Driving the Mod Down
• Medical Management• Use preferred provider
network physicians as recommended by your workers’ compensation carrier to reduce medical/claim costs.
• Be creative in establishing “transitional duty” jobs that help keep employees at work even with doctor-imposed restrictions.
